Argentina is a blocked society: its economic institutions are dysfunctional, but its transformation would harm the central interests of sectors of society with strong economic and political power (important segments of the business class, unionism, the political class), which would mobilize in the Congress, the streets and the polls to try to prevent it.
Ellsberg's paradox helps to understand this situation.
Daniel Ellsberg, an economist, found that, when decision makers face options that involve different levels of risk, they tend not to prefer those that would maximize their benefit (“expected utility,” in economics jargon), but whose risks are unknown;
but those whose risks are known and calculable, despite yielding minor benefits.
It is known that the country has declined, relatively to others, since the postwar: our per capita product and living standards a century ago were comparable or higher than those of the countries from which mass immigration came and other Western European countries, and Now they are not only much inferior to theirs, but also to those of Latin American countries, which were then much poorer.
Argentina has not only regressed comparatively, but has stagnated for decades, and gradually acquired the dual social structure characteristic of underdevelopment, with an important sector of its population not regularly integrated into the occupational structure.
A well-established proposition in social science is that a country's wealth and living standards are determined by its institutions.
The Argentine decline, in my analysis, is the result of an institutional transformation that took place in the postwar period, a central component of which was the closure of the economy, maintained for most of the time since then.
I am referring to import substitution as it was practiced in the country: high level of protection for non-competitive industry, through import taxes and non-tariff barriers, which was relatively indiscriminate, unlimited in time, and not contingent on future competitiveness.
This protection was institutionalized, meaning that the central interests of the capitalists and workers of the protected sector, and a large part of the political class, are committed to its preservation.
Furthermore, the defense of this radical protectionism is a central principle of the ideology of the country's major political forces, and became the predominant common sense in society.
The result has been one of the most closed economies among middle-income countries, with a significant proportion of capital and labor invested in non-competitive activities.
To grow again, the country must open its economy, as post-Franco Spain, South Korea, the post-communist countries of Europe and Asia, Mexico and Chile in Latin America did in recent decades.
Reducing or eliminating import barriers would be lethal for the less competitive sector, which would not survive the loss of its captive market.
But the industries that resisted, either because they were already competitive or because they were reconverted in terms of technology and productive organization, plus the new ones that would be established within the framework of an open economy, could export.
International niches in the manufacturing industry, together with agricultural, mining and knowledge economy exports, would allow us to reestablish the growth pattern that characterized the country before the Depression and the War.
A naive observer of this situation would be perplexed: with opening, in the medium term the income of the vast majority of the population would substantially improve;
In the short term, the entrepreneurs and workers of unviable companies (the “artificial” ones, to use the language of the 40s), those that refuse to convert, or those that will try but fail, and the districts in which they are located would be harmed. These companies.
The unviable ones would have no way out, but a large segment of the manufacturing industry is made up of companies that, under the right conditions, could reconvert and be competitive.
However, its short-term costs would be defined;
medium-term benefits, random.
How could this situation be overcome?
Altering the parameters in which Ellsberg's paradox works.
The opposition of sectors linked to unviable industries (for example: electronics in Tierra del Fuego) is inevitable, but that of businessmen, workers and provincial governments associated with the large sector of potentially convertible manufacturing industries could be diminished through policies that make, for the actors social and political, the risks of conversion are better known and calculable: gradual opening but with an established schedule, soft credits and tax incentives for technological re-equipment, labor reform, substantial unemployment insurance, hand-held re-training programs of displaced work, active employment policies, etc.
These measures would require not only a government aimed at implementing them, but also a relatively autonomous State, not penetrated by corporate interests that use it as an instrument, or politicians for whom it is loot;
and equipped with the necessary regulatory and distribution capabilities.
A profound reform of the State is a prerequisite for a successful opening of the economy.
These two transformations are the central challenges facing Argentine society.
Carlos H. Waisman is a sociologist. Professor and researcher in the Department of Sociology and International Studies. University of California, San Diego, USA